March 4, 2009 / 4:57 PM / 11 years ago

Mass. treasurer proposes slots, privatizing lottery

* Sees up-front payment of $1 bln for lottery license

* Sees up to 9,000 slot machines in three big parlors

By Svea Herbst-Bayliss

BOSTON, March 4 (Reuters) - Massachusetts MSCHT.UL Treasurer Tim Cahill proposed privatizing the state lottery and licensing thousands of slot machines to quickly raise billions of dollars for the financially ailing state.

Cahill, whose office oversees the lottery, said on Wednesday the state could raise as much as $1 billion by selling a 50-year license to a private company to run the lottery, which had $4.7 billion in sales last year.

After the up-front payment, a privatized lottery would bring in as much as $900 million a year for the state, he told the Boston Chamber of Commerce.

Cahill also proposed selling the rights to three big slot machine parlors, which could bring in as much as $3.35 billion up front and as much as $243 million annually by collecting a 27 percent tax on the machines’ revenue.

He said slot machine parlors should be built first, and privatizing the lottery should be considered after that.

“This is a pretty sure (revenue) thing,” Cahill said after unveiling his plan to place as many as 9,000 slot machines across the state to attract Massachusetts residents who now gamble in neighboring Rhode Island and Connecticut.

Critics of the plan warned that slot machines do not always deliver on the promise of fast cash, especially at a time when most state residents face much tighter personal budgets.

Cahill’s plan for slot machines marks a dramatic about-face from the luxurious destination-style casinos that he and the state’s governor championed two years ago.

These complexes, complete with hotels and up-scale shopping, are “uneconomical” now, Cahill said, arguing they are too expensive to build and would not attract enough visitors as unemployment climbs and the state faces its worst financial crisis in decades.

Slot parlors, often housed in quickly constructed warehouses, are cheaper to build and maintain, Cahill said. He expects strong demand from private operators for the 15-year to 20-year licenses. Hedge funds and private equity firms would be interested in the project, as they have plenty of cash to put to work, Cahill said.

“It is a quick fix,” he said, adding that his plan could begin bringing in money for the state as soon as next year if the state legislature approves it.

The up-front payments for the slot parlors would be divided equally to replenish the state’s stabilization fund, create a fund to help pay retirees’ health insurance costs, and beef up the University of Massachusetts’ endowment, Cahill said.

Massachusetts currently faces $13 billion liability to pay health care costs for the state’s 50,000 retirees and the 85,000 state workers who will eventually retire.

“If we could get this seed money, we would be the first state in the country to have a fund for this type of cost,” Cahill said. (Reporting by Svea Herbst-Bayliss; editing by John Wallace)

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